How to Win with Convergence

The idea of convergence offers—packages that leverage an operator’s fixed and mobile assets—is not new. While some markets have shown high adoption rates of such offers, they often fail to deliver value for the operators. This is because most offers are simply discounted bundles that the competition can easily duplicate and win on price alone.

In addition, the types of bundles that are attractive to customers depend on the markets, and even the segments within the markets. Fixed-line services are a much smaller focus in emerging countries, but some regions, such as Malaysia and Brazil, still see rich adoption of such services among upper- and middle-class consumers. This creates challenges in managing a diverse set of services that can cater to both lower- and upper-class consumers.

There is a better way. By providing unique products that combine fixed, mobile, and TV services into a truly valuable package, telcos can turn the game around. The first success stories are emerging in Europe, but the full potential has yet to be realized.

Traditionally customers sometimes receive a discount for buying two products to be used together, such as Internet and an IPTV box for television. A new offering combines two products for the additional benefit of being able to watch television on any device.

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Nine Ways to Gain Value with Convergence

How can providers design convergence offers that work? Here are nine practical ways to do it.

Two new models for convergence offers—multi-access line bundles and value-added services—provide greater opportunities for creating value than the traditional approach of adding mobile to fixed plans and discounting the price. But you have to think about what you want to achieve. Is it increased market share? And if so, on which products and for which segments? Carefully consider the value proposition of a proposed converged offer and under which circumstances it will be good for the consumer.

In most markets, households are high-value customers because they represent multiple users and devices. What’s more, households usually have a lower risk of churn: the more users and devices on a plan, the more inconvenient it is to switch to another provider.

Many services are no longer bound to specific types of access. Netflix and Apple, for example, can stream video content to users no matter how they connect to the Internet. Telcos can capitalize on that by bundling the services provided on multiple devices.

Features such as multi-device video streaming and online gaming don’t just make for positive discounts; they can also boost usage. With the right pricing structure in place, telcos should see significant growth as users trade up to greater data allowances, both on individual as well as on shared multi-SIM-card plans.

There’s something to be said for the approach of “if you can’t beat ’em, join ’em.” By striking exclusive or semiexclusive deals with over-the-top providers—such as the partnerships that some operators have created with video- and music-streaming services—telcos can further differentiate their convergence offers.

Ease into convergence if you have the advantage of being a first mover in the market (if not, you’ll need to move quickly to avoid being left behind). In general, consumers need time to move away from the idea of straight price discounts. A staged approach also makes it easier to make the IT and process changes required to support convergence. Try introducing features that convey the idea of positive discounts, such as shared data allowances or the ability to use a mobile handset as a fixed-line phone. Then add some “light” convergence offers, such as the ability to watch TV on mobile devices, before moving toward a full convergence portfolio.

Avoid the price war problem by differentiating on features instead of cost. Evaluate the competition’s capabilities and potential responses, and adjust offers accordingly. Also consider regulatory constraints because they may limit how you can combine and price services, particularly on the mobile side.

Convergence should be a strategic, multiyear effort involving most, if not all, departments. It requires high-level executive oversight and seamless collaboration between the fixed and mobile sides, including all organizational functions. As convergence evolves, the separation of budgets becomes less relevant. Yet there are still people accountable for the numbers on each side. The business has to understand which investments pay off so it can focus on those and balance budgets accordingly.

It’s important to measure success with convergence. After all, early successes are prerequisites for more complex offerings. But choosing the appropriate metrics can be difficult because there is no one-size-fits-all approach. To find the right key performance indicators, consider your customer base and your competitive strengths. For example, is the mobile side much stronger than the fixed? Also think about long-term objectives, such as reduced churn, lower subscriber acquisition costs, more revenue-generating units per household, and increased average revenue per household.

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